INSIGHT: Dow still faces shock waves

12 April 2007 17:23  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--Dow’s dismissal on Thursday of its performance plastics and chemicals head Romeo Kreinberg and senior adviser and former chief financial officer Pedro Reinhard will reverberate around the group.

There is speculation that the company may still be the subject of a buy-out approach but a possible Middle East connection to one of the largest leveraged buy-outs in corporate history has been largely dismissed.

Kreinberg particularly was at the forefront of Dow’s strategy to push into performance products to create more market-focused businesses. He was a strong advocate of the market-led approach.

Dow has been rocked by the revelation that the two men were involved in unauthorised discussions with third parties about a takeover of the group.

The board has a tough job on its hands now to quell disquiet and to try to build a stronger strategic direction that is recognised inside Dow as well as out.

It has also to be one that is seen to drive shareholder value.

Dow will stick to its guns but needs to apply its market-facing corporate strategy more forcibly.

“We will move on to shape our future with an even greater resolve to execute our strategy and deliver value to our shareholders,” chief executive Andrew Liveris said, not unexpectedly in reaction to the news.

Yet Dow is clearly embattled and there are gaps to fill.

The two dismissed officers between them had more than 60 years experience of Dow; they knew the 110-year-old company inside out.

That counted for a lot.

Kreinberg particularly was Dow’s Mr Plastics and with his roots in Europe had broad geographical expertise.

He also understood how Dow would benefit from getting closer to end-user markets and from being cleverer in its approach to generating greater asset value.

The problem now is that many in the second tier of executive management who were Kreinberg proteges must feel embattled if not threatened.

They probably represent more than half this next level of management so Dow ultimately could suffer greater losses than one key executive vice-president and an important senior adviser.

The Dow rumour mill is grinding on with speculation that a bid for the company may yet materialise. Strategic buyers possibly in combination with private equity have been put in the frame.

The drive at Dow is for recognisable value but strategy is all about execution and delivery. New talent can step into the dismissed executives’ shoes and help restabilise the group.

Liveris and his team, however, have to work fast to show that Dow means business and that the company can be creative in the way it delivers greater asset value. The Dow story has taken another major turn.

By: Nigel Davis
+44 20 8652 3214

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